Corn and wheat prices are up with cotton and soybean prices down for the week. The December U.S. Dollar Index was trading before the close at 76.62, down 0.30 since last Friday. The Dow Jones Industrial Average before the close was trading up 120 points for the week at 11,764. Crude Oil was trading before the close at 87.59 a barrel, up 0.07 a barrel since last Friday. The relationship of the Euro (European currency) and the U.S. Dollar continue to have an effect on commodity markets. Generally speaking, when there is turmoil and uncertainty in Europe’s financial markets, the Euro weakens, Dollar strengthens, and commodity prices go down as U.S. commodities become more expensive in the global marketplace. Conversely, when the Euro strengthens, the Dollar weakens and commodity prices go up. This is a simplistic view but one that tends to be right more often than not. Markets have reacted this week from news of Europe’s financial market and are watching closely whether the results of a European Union debt crisis summit can remove the uncertainty in the market. A post-harvest rally could be dependent on a successful resolution to this crisis.
Corn:
Current Crop: December closed today at $6.49 ¼ a bushel, up 9 ¼ cents a bushel since last Friday. Support is at $6.37 with resistance at $6.71 a bushel. Technical indicators have a hold bias. Weekly exports were below expectations at 72.7 million bushels (69.4 million bushels for 2011/12 and net sales of 3.3 million bushels for 2012/13). This includes the 35.4 million bushel sale to China and 8.3 million bushel sale to unknown destinations announced last week. Although export reported this week may have been disappointing (maybe expectations too high), we are currently 5% ahead of exports this time last year while USDA is projecting a 13% decline in exports from last year. Corn harvested as of October 16 was at 47% compared to 33% last week, 66% last year and the five year average of 41%. Basis levels have unusually strengthened for this time of year and reflect strong end user buying and a lack of producers selling grain other than what was contracted. That could come from a hope for higher prices or a crop that is smaller than thought. I am currently 50% forward priced for 2011 and 25% priced using a December $6.90 Put option that has been offset with a 42 cent profit. I would hold the remaining 25% of production in storage, but be ready to price on any rallies back up to the $6.80 – $7.00 range. Currently, the cash price spread for corn stored would be hard pressed to pay the full cost of storage so corn stored un-priced is strictly speculative (hope for prices going higher). Predicting basis levels is as difficult or maybe more so as predicting prices, but producers with corn in storage may want to consider locking in at least a portion of the basis for corn stored.
Deferred: March closed at $6.60 a bushel, up 8 ½ cents a bushel since last Friday. Technical indicators have a hold bias. Support is at $6.48 with resistance at $6.81 a bushel. September 2012 corn closed at $6.25 ¼ a bushel. Watch closely over the next few months for opportunities to price the 2012 crop.
Cotton:
Current Crop: December closed at 97.19 cents per pound, down 4.75 cents since last week. Support is at 95.16 cents per pound, with resistance at 99.82 cents per pound. Technical indicators have changed to a strong sell bias. All cotton weekly export sales were 60,100 bales (sales of 59,300 bales of upland cotton for 2011/12 and sales of 800 bales of Pima cotton for 2011/12. The Adjusted World Price for October 21 – October 27 is 90.01 cents/lb.; down 1.32 cents/lb. from last week. Quotes on 2011 loan equities are in the 37 – 38 cent range. Keep in contact with your cotton buyer for current quotes on loan equities and pricing alternatives. Cotton harvested is at 34% compared to 26% last week, 38% last year and the five year average of 29%. Cotton is trading in a demand market where demand has softened along with concerns on the global economy. China’s economy while growing at a 9.1% level has started slowing and has created concerns on a possible decrease in consumption. Cotton prices would be helped by a favorable resolution to European debt crisis. I am currently at 45% priced and would use any rallies in the 104 -110 cent range as a point to evaluate pricing.
Deferred: March cotton closed at 95.56 cents per pound, down 3.83 cents for the week. Support is at 93.74 cents per pound, with resistance at 98.04 cents per pound. Technical indicators have changed to a strong sell bias. December 2012 prices closed at 92.07 cents/lb.
Soybeans:
Current Crop: The November contract closed at $12.12 ¼ a bushel, down 67 ¾ cents a bushel since last Friday. Support is at $11.90 with resistance at $12.57 a bushel. Technical indicators have changed to a strong sell bias. Weekly exports were below expectations at 21.9 million bushels for the 2011/12 marketing year. China accounted for 12.2 million bushels of sales while unknown destinations (sometimes is China) were another 3.1 million bushels. European analyst group Oil World sees China’s imports 73.5 million bushels higher than USDA projections. They look for China to start buying additional bushels soon and they see soybean prices going higher in the foreseeable future. The question may be whether these additional purchases will come from the U.S. or South America. Long term weather forecasts for South America include significant dryness so that will bear watching as to their production. Soybeans harvested were at 69% compared to 51% last week, 81% last year and the five year average of 61%. In weekly comments, I am currently 50% priced for 2011 and 25% priced using a November $14 Put option that has been offset or closed out with a $1.62 profit. As in corn, basis improvement has negated any carry in the market as cash prices now and what could be booked for in the spring are about the same. Storage is still a harvest time decision and I think an alternative if soybean prices stay under $12.80 -$13.00 bushel. If storage is available, I would look to store the remainder with a price target in the $13.00 – $13.40 range. Consider locking in a portion of the basis on stored soybeans.
Deferred: May soybeans closed today at $12.35 ½ a bushel, down 53 ½ cents since last week. Support is at $12.17 with resistance at $12.71 a bushel. Technical indicators have changed to a strong sell bias. November 2012 soybeans closed at $12.08 ¾ this week.
Wheat:
Nearby: December futures contract closed at $6.32 a bushel, up 9 ¼ cents a bushel since Friday. Support is at $6.15 with resistance at $6.58 a bushel. Technical indicators have a sell bias. Weekly exports were below expectations at 14.7 million bushels for 2011/12. Large wheat stocks globally tend to put pressure on the market, but generally stocks in some countries such as China do not make it to the world marketplace. Other countries such as India are restricting their grain exports in order to build reserves and cover food security. Policies and action of this type will be supportive of prices at least in the short term.
New Crop: July 2012 wheat closed at $6.97 ½ a bushel, up ½ cent since last week. Support is at $6.83 with resistance at $7.23 a bushel. Technical indicators have changed to a sell bias. Nationwide, winter wheat planted is 73% compared to 59% last week, 80% last year and the five year average of 77%. As of October 16, winter wheat emergence is at 44% compared to 28% last week, 50% last year and the five year average of 51%. Also offering support to the market is the National Weather Service forecast of hot and dry conditions through January across much of the Central and Southern Plains.
